Ownership Efficiency and Tax Advantages: The Case of Private Equity Buyouts
Commentators on the private equity industry often claim that favorable tax treatment gives private equity firms advantages in the market for corporate control. But we show that tax advantages do not affect the equilibrium ownership of corporate assets when acquisition costs are fully deductible since buyers' valuations of assets are then independent of taxes. However, tax advantages are of importance under limited bidding competition, limited deductibility and in the presence of oligopolistic externalities in the product market. We also show that from an efficiency perspective, there are too many acquisitions in a double taxation system because acquisitions create deductions for buyers that are not available to sellers.
|Date of creation:||11 Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden|
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Becker, Johannes & Fuest, Clemens, 2011.
"Tax competition -- Greenfield investment versus mergers and acquisitions,"
Regional Science and Urban Economics,
Elsevier, vol. 41(5), pages 476-486, September.
- Johannes Becker & Clemens Fuest, 2008. "Tax Competition – Greenfield Investment versus Mergers and Acquisitions," CESifo Working Paper Series 2247, CESifo Group Munich.
- Johannes Becker & Clemens Fuest, 2010.
"Taxing Foreign Profits With International Mergers And Acquisitions,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 171-186, 02.
- Johannes Becker & Clemens Fuest, 2007. "Taxing Foreign Profits with International Mergers and Acquisitions," Working Papers 0719, Oxford University Centre for Business Taxation.
- Haufler, Andreas & Schulte, Christian, 2007.
"Merger Policy and Tax Competition,"
Discussion Papers in Economics
2074, University of Munich, Department of Economics.
- Becker, Johannes & Fuest, Clemens, 2011.
"Source versus residence based taxation with international mergers and acquisitions,"
Journal of Public Economics,
Elsevier, vol. 95(1), pages 28-40.
- Becker, Johannes & Fuest, Clemens, 2011. "Source versus residence based taxation with international mergers and acquisitions," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 28-40, February.
- Johannes Becker & Clemens Fuest, 2009. "Source versus Residence Based Taxation with International Mergers and Acquisitions," CESifo Working Paper Series 2854, CESifo Group Munich.
- Erik Devos & Palani-Rajan Kadapakkam & Srinivasan Krishnamurthy, 2009. "How Do Mergers Create Value? A Comparison of Taxes, Market Power, and Efficiency Improvements as Explanations for Synergies," Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 1179-1211, March.
- Weisbach, Michael & Axelson, Ulf & Jenkinson, Tim & Stromberg, Per, 2008.
"Leverage and Pricing in Buyouts: An Empirical Analysis,"
08-1, University of Pennsylvania, Wharton School, Weiss Center.
- Ulf Axelson & Tim Jenkinson & Per StrÃ¶mberg & Michael S. Weisbach, 2008. "Leverage and Pricing in Buyouts: An Empirical Analysis," OFRC Working Papers Series 2008fe20, Oxford Financial Research Centre.
- Ulf Axelson & Tim Jenkinson, 2008. "Leverage and Pricing in Buyouts: An Empirical Analysis," Economics Series Working Papers 2008fe20, University of Oxford, Department of Economics.
- Sharon Katz, 2008. "Earnings Quality and Ownership Structure: The Role of Private Equity Sponsors," NBER Working Papers 14085, National Bureau of Economic Research, Inc.
- Pehr-Johan Norbäck & Lars Persson & Jonas Vlachos, 2009. "Cross-border acquisitions and taxes: efficiency and tax revenues," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1473-1500, November.
- Landsman, Wayne R. & Shackelford, Douglas A. & Yetman, Robert J., 2002. "The determinants of capital gains tax compliance: evidence from the RJR Nabisco leveraged buyout," Journal of Public Economics, Elsevier, vol. 84(1), pages 47-74, April.
When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0841. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elisabeth Gustafsson)
If references are entirely missing, you can add them using this form.